A City-County Council member and two associates persuaded an Indiana physician to invest $1.7 million in their foundation and an ethanol-production business they said would fund it, but instead spent the money on personal luxuries, according to a federal indictment filed late Tuesday.

The indictment charges Paul C. Bateman Jr., a council Democrat who did not seek re-election this fall, Michael L. Russell and Manuel Gonzalez with multiple counts of money laundering and wire fraud in connection with an alleged scheme to defraud the physician in 2007.

Bateman declined to comment on the charges Wednesday morning but provided the name of his attorney, who could not immediately be reached.

According to court documents, Russell—also known as Rev. Michael L. Russell—co-founded The Russell Foundation in 2003 with the mission to “enhance society through compassionate concerns for the spiritual, moral and ethical fibers of the community.” He served as CEO, while Bateman served as chief administrative officer and chief corporate officer, and Gonzalez held various positions.

Russell proposed that the foundation fund itself through the production and distribution of ethanol, according to the indictment. In January 2007, he approached the physician, identified in court documents as “A.S.,” during a medical appointment about making an investment in an entity later established as Indiana Ethanol Capital Investments LLC. Russell, Bateman and Gonzalez attended several meetings with the doctor at a Denny's restaurant to further sell him on the investment.

Russell told the physician that the ethanol operation could reap an $18.5 million return on a $600,000 investment, and that he would be the last of 12 people to invest in it. In fact, the doctor was the only investor.

Between February 2007 and April 2007, according to court documents, Bateman picked up five checks for the ethanol investment totaling $702,000, most of which was deposited into Bateman’s personal account. The remainder was put into The Russell Foundation account, and later was transferred between that account and Bateman’s personal account.

All but $30,000 of the money was spent on items such as custom clothing, home furnishings, entertainment and “elaborate security details” that included members of the Indianapolis Metropolitan Police Department, the indictment says. All but $44,000 of the money was spent by May 2007.

In that same month, Russell also solicited the doctor to purchase a corporate cash bond of $1 million issued by The Russell Foundation. He pledged a return of $600,000. Russell also falsely told him that the foundation already had raised $3 million.

The indictment said Russell, Bateman and Gonzalez provided the physician with a document that appeared to be a corporate cash bond with a maturity of $1.6 million and a maturity date of Dec. 31, 2007. The $1 million, transferred in two payments from the doctor’s Stifel Nicolaus account, was to be disbursed “in accordance with development of the Russell Foundation, Inc., Humanitarian Projects.”

Instead it was spent for personal gain, including Bateman’s $22,187 income-tax payment; luxury vehicles such as a Cadillac Escalade and Jeep; $25,000 in custom-made clothing; and $25,000 for a rent payment on a residence Russell used.

The men also persuaded the physician to extend the date of the promised return from December 2007 to March 2008.

In both cases, federal prosecutors allege the men used Bateman’s position as a councilor to lend credibility to The Russell Foundation.

Russell, Bateman and Gonzalez face a combined 43 counts, including 18 for Bateman. A spokesman for U.S. Attorney Joe Hogsett said all three will be summoned into court for their initial appearance in about a week.